Foreign Relations of the United States, 1952–1954, China and Japan, Volume XIV, Part 2

894.10/5–2853

No. 650
Memorandum of Conversation, by the Assistant Secretary of State for Far Eastern Affairs (Robertson)¹

confidential

[Washington,] May 28, 1953.

Subject:

• Japan’s Application for Electric Power Loans.

Participants:

• Mr. Garner, Vice President, International Bank for Reconstruction and Development (IBRD)
• Mr. Walter S. Robertson, Assistant Secretary for Far Eastern Affairs

Mr. Garner informed me today that the IBRD made the following decisions regarding Japan’s electric power loans:

(1) The Bank will take over the loan for thermal power of approximately $40 million. The Bank can complete arrangements on this in about six weeks.

(2) However, if that is not soon enough Mr. Garner says temporary credit can be arranged through Mr. Maffrey, of the Irving Trust.

(3) The Bank continues to believe that there should be only one bank for Japan, and that it should be the IBRD. If it extends a loan to Japan, the Bank will expect to work out arrangements with the Japanese Government to help it develop conservative fiscal policies.

(4) Under present conditions, the loaning capacity of the Bank to Japan will be restricted to a ceiling of $100 million.

(5) Whether or not 40 percent of this $100 million should be devoted to thermal power projects is up to the Japanese Government to decide.

(6) The IBRD will waive its usual requirements for competitive bids in view of the fact that Westinghouse Corporation and General Electric are the logical suppliers of the highly technical equipment involved.

(7) While the Bank is ready to consider these arrangements with Japan, it is up to the Japanese to decide on the priority of the projects and the loans themselves.

Mr. Garner asked me to inform Ambassador Araki of the above position of the Bank and the decision is now up to the Japanese Government. Mr. Garner also asked me to inform him when the Japanese Government indicated to the Department of State its reaction to the above proposals. At that time, Mr. Garner would like Ambassador Araki to see him about the terms, arrangements, etc., of the loan.

I emphasized to Mr. Garner our firm and continued interest in Japan and the Far East could be counted on and that the loans he was prepared to make to Japan on a sound financial basis would provide a real contribution to the interests of the United States Government in that area.²

1. Drafted by Young although he is not listed among the participants.

2. In reporting the IBRD’s preliminary decision to the Embassy in Tokyo, the Department stated in part: “[Japanese] Embassy officer expressed concern over role of Bank as sole lender and asked if US Government accepted this position. Was informed US considers IBRD bank of first recourse for development loans, this is case in point, and that other bridges will be crossed when we come to them.” (Telegram 2806 to Tokyo, May 30, 894.2614/5–3053)

   On June 1 Ambassador Araki stated to Robertson that the Japanese Government had agreed to transfer the power loan application to the IBRD. (Memorandum of conversation by Robertson, 894.10/6–153) The IBRD completed arrangements with the Japan Development Bank for a $40.2 million thermal power loan on Oct. 15.